Mr. Vlad Volodarski reports

CHARTWELL ANNOUNCES SECOND QUARTER 2023 RESULTS

Chartwell Retirement Residences Real Estate Investment Trust has released its results for the second quarter ended June 30, 2023.

Highlights:

• Net loss was $7.5-million in Q2 2023 compared with net income of $1.1-million in Q2 2022. This net loss included $3.1-million of negative change in fair value of financial instruments, primarily from the increase in trading prices of its trust units, compared with a positive change in fair value of financial instruments of $7.2-million in Q2 2022.
• Same-property adjusted net operating income was up 8.7 per cent in Q2 2023 from Q2 2022.
• Weighted-average same-property occupancy was 79.2 per cent in Q2 2023, an increase of 1.8 percentage points compared with Q2 2022, with all platforms achieving growth. Same-property occupancy is forecasted to grow to 81.7 per cent by September, 2023.
• The company received regulatory approval to sell its Ontario long-term-care platform, with the transaction expected to close in September, 2023.
• Fifty-four per cent of employees in its retirement operations indicated their high level of engagement in 2023, a five-percentage-point increase from 2022 and within one percentage point of its aspirational 2025 target of 55 per cent.

"Our Q2 2023 results reflect our continuing focus on accelerating occupancy growth and reducing reliance on agency staffing. Our commitment to deliver an exceptional resident experience and our strong local reputation in the markets we serve allow us to grow resident, family and business referrals. Our targeted marketing programs generate more qualified leads and improve our sales closing ratios with lease signing activity this year being 21 per cent higher than in 2022. Our recruitment and retention efforts have resulted in the continuing decline of our agency spend. I am confident that our talented and dedicated operations teams supported by new technology solutions will deliver strong occupancy and cash flow growth in the second half of this year and beyond," commented Vlad Volodarski, chief executive officer. "There is significant embedded potential value in our portfolio. We are committed to realizing it through our operating initiatives and numerous portfolio optimization strategies under way."

Financial results

The attached table summarizes select financial and operating performance measures.

2023 outlook

An updated discussion of its business outlook can be found in the 2023 outlook section of its management's discussion and analysis for the three and six months ended June 30, 2023.

Same-property occupancy update

Due to seasonally lower move-in activity, it normally experiences declines in occupancy from December to April. The three-year average for 2017, 2018 and 2019 decline in its same-property portfolio occupancy from December to April was 180 basis points. For the same four months in 2023, the decline in occupancy was 40 bps, significantly lower than the prepandemic average. Occupancy and leasing trends are also outperforming the same months of 2022. Occupancy is expected to increase by 260 bps from December, 2022, to September, 2023, compared with a decline of 10 bps for the comparable period in 2022. Leasing activity to date in 2023 is 21 per cent higher than 2022.

As at July 31, 2023, its same-property weighted-average occupancy is expected to increase 60 bps in August, 2023, and a further 70 bps in September, 2023.

Its marketing and sales initiatives produced improvements in personalized tours, sales closing ratios, leasing and permanent move-ins. Leasing activity in 2023 to date is 15 per cent higher than the prepandemic average. It expects to see continued occupancy growth in 2023 and beyond, supported by accelerating demographic growth, shortages of long-term-care beds and fewer senior housing construction starts.

Staffing costs increased in Q2 2023 due to higher compensation offset by a decrease in agency staffing costs. It expects agency staffing costs to continue to decline gradually through 2023.

Taxation

It estimates the taxable capital gain resulting from the LTC transactions will attract specified investment flow-through taxes of approximately $32.5-million in 2023 and $1.5-million in 2024. In addition, the majority of its 2023 distributions is expected to be classified as eligible dividends as a result of the taxable capital gain. It expects to have sufficient deductions and losses carried forward to offset any other SIFT taxes in 2023 and 2024.

Portfolio optimization and repositioning activities update

It completed the operational closure of two retirement residences (225 suites) in first quarter 2023 and one retirement residence (109 suites) on July 17, 2023. The majority of the residents in these properties was relocated to other Chartwell retirement residences in the area. It expects to sell these first two properties for alternative uses and has entered into a definitive agreement to sell the third property for a sale price of $17.5-million. The transaction is expected to close in third quarter 2023. During Q2 2023 and year-to-date 2023, closure costs related to repositioning activities were $1.2-million and $1.8-million, respectively, with $800,000 and $1.4-million, respectively, included in net operating income.

During Q2 2023, Batimo Inc. exercised its put right to require Chartwell to acquire an 85-per-cent interest in the 361-suite Chartwell Trait-Carre residence located in Quebec City. The property is currently 94.2 per cent occupied. As required under its agreements with Batimo, Chartwell commissioned an appraisal of this property. The appraised value of the property at 100-per-cent ownership was $85.3-million. Batimo exercised its right to commission a second appraisal. Subject to the completion of the contractual appraisal process, it expects to acquire this property in fourth quarter 2023.

Quarterly investor materials and conference call

The company invites you to review its Q2 2023 investor materials on its website.

A conference call hosted by Chartwell's senior management team will be held Friday, Aug. 11, 2023, at 10 a.m. ET. The telephone numbers for the conference call are: local: 416-340-2217 or toll-free: 1-800-806-5484. The passcode for the conference call is 3803627 followed by the number sign. A slide presentation to accompany management's comments during the conference call will be available on the website. The conference call can also be heard over the Internet by webcast. Visit Chartwell's website, and follow the link at the top of the page. Please log on at least 15 minutes before the call commences.

The telephone numbers to listen to the call after it is completed (instant replay) are: local: 905-694-9451 or toll-free: 1-800-408-3053. The passcode for the instant replay is 3422281 followed by the number sign. These numbers will be available for 30 days following the call. An audio file recording of the call, along with the accompanying slides, will also be archived on Chartwell's website.

About Chartwell Retirement Residences Real Estate Investment Trust

Chartwell is in the business of serving and caring for Canada's seniors, committed to its vision of making people's lives better and to providing a happier, healthier and more fulfilling life experience for its residents. Chartwell is an unincorporated, open-ended real estate trust which indirectly owns and operates a complete range of seniors housing communities, from independent living through to assisted living and long-term care. Chartwell is the largest operator in Canada, serving over 25,000 residents in four provinces across the country.

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